Interesting report from The Tax Foundation about a new Arkansas law that lowers the state’s cigarette excise tax in towns bordering other states with lower tax rates. The idea is to eliminate travelling over state lines to pay less in taxes for cigarettes.
What will be really interesting to see is what happens when retailers in the next layer of towns who will get to watch their customers leave town — but not the state, which is illegal — to buy cheaper smokes.
Kentucky legislators wouldn’t fall into a trap like this which might actually generate lower tax revenues and lead to less spending. It’s too bad. Now that we have raised our cigarette tax above that of Missouri, West Virginia, and Virginia, we would be a great candidate to follow Arkansas on this one and save a few Kentucky businesses.